Since the collapse of the Soviet Union there has been a debate over the legal status of the Caspian Sea: Is it a sea, or is it a lake? And to whom does it belong? The outcome of this debate will have a major impact on the way energy resources are extracted and transported, and by whom—which could have a major impact on U.S. economic and security interests in the region.

This is especially true regarding the completion of the Trans-Caspian Gas Pipeline potentially linking Central Asian energy markets with Europe, bypassing Russia and Iran. During a meeting of the five foreign ministers of the Caspian Sea littoral states[1] in July, Russian Foreign Minister Sergey Lavrov suggested that an agreement would be made sometime next year. Although Washington is not involved in the talks, the U.S. should monitor the situation closely, support a peaceful and speedy resolution of Caspian Sea ownership, and offer political support for the construction of the Trans-Caspian Gas Pipeline.

U.S. Interests in the Caspian Region

The Caspian Sea is an important, if often-overlooked, region in regard to many of the challenges the U.S. faces around the world, such as a resurgent Russia and an emboldened Iran. The region is a crucial geographical and cultural crossroads linking Europe and Asia, and has been strategically important for military and economic reasons for centuries.

An important consideration for the U.S. is the potential of Caspian oil and gas to offset much of Europe’s dependence on Russia (and potentially Iran) for its energy needs. This, in turn, directly affects Europe’s security and, potentially, U.S. treaty obligations under NATO.

The outcome of the “lake or sea” debate will greatly affect future pipelines transporting oil and gas from Central Asia to Europe. The construction of a Trans-Caspian Gas Pipeline is something that Europe needs, and something that Russia and Iran seek to avoid. This could have serious implications for energy policy and geopolitics.

A Lake or a Sea?

Under the Soviet Union, ownership of the Caspian Sea was divided between Russia and Iran. After the collapse of the Soviet Union, Azerbaijan, Kazakhstan, and Turkmenistan emerged as sovereign and independent states without an agreement on how to divide or share the Caspian Sea among the five littoral countries.

The unsettled issue is whether the Caspian is a lake or a sea and which of two sets of public international law apply to the Caspian: the law of the sea if it is a sea, or customary international law governing border lakes if it is a lake.

If the law of the sea is applied, with the coastline and equidistance measurements used to determine each country’s economic exclusive zone, Kazakhstan would be the big winner receiving an estimated 29.9 percent of the Caspian. Azerbaijan would control 20.7 percent; Turkmenistan, 19.2 percent; Russia, 15.6 percent; and Iran, only 14.6 percent.[2]

If the Caspian is considered to be a lake, each country would control 15 nautical miles from its shore for mineral exploration, and another 10 nautical miles for fishing. Everything else would be shared jointly between all five littoral countries. Any major decision affecting the Caspian, such as the construction of a pipeline, would need to be approved by all.

Even with the “lake or sea” dispute, the Caspian countries have made modest progress on agreeing on certain sections of the seabed. In 2014, at the fourth Caspian Summit in the southern Russian city of Astrakhan, the leaders of the Caspian states agreed that each country’s sovereignty will extend 15 nautical miles from the shore for mineral exploration and production, and an additional 10 nautical miles for fishing rights.[3]

Competing Interests

Each Caspian country takes a different position on the status of the Caspian Sea for reasons of national interest.

Azerbaijan and Kazakhstan want to delineate the seabed based on the law of the sea. This is not surprising since the two countries would be the biggest winners under this scenario. In 2002, Azerbaijan and Kazakhstan signed agreements with Russia recognizing national sectors based on lines drawn in the sea halfway between each state.

In May 2015, Turkmenistan and Kazakhstan reportedly agreed on Caspian maritime borders.[4] The maritime border between Turkmenistan and Azerbaijan is disputed, as is the Turkmen–Iranian maritime border.

During the 1990s, Russia was unable to form a single position largely due to an internal dispute. The Russian Ministry of Foreign Affairs considers the Caspian to be a lake, believing this stance to be the best way to preserve Russia’s dominant geopolitical role in the region. On the other side, the Ministry of Fuel and Power and the oil and gas companies, such as Yukos and Gazprom, are driven more by financial considerations than anything else and generally support dividing the Caspian along the lines of the law of the sea. This would allow Russian companies to compete for more lucrative contracts.

Moscow’s incoherent position has evolved into one that is best described as “common waters, divided bottom.”[5] With this policy, Russia wants to maintain surface navigational rights (and therefore naval supremacy) in the Caspian while taking a more pragmatic approach to oil and gas exploration and ownership. Azerbaijan and Kazakhstan have at least implicitly agreed to Russia’s “common waters, divided bottom” approach.

As the Caspian country with the shortest coastline, Iran’s position is straightforward: It considers the Caspian to be a lake. To back up its claim, Tehran argues that the 1921 Treaty of Friendship, and the 1940 Soviet–Iranian Trade and Navigation Agreement have primacy in terms of the Caspian’s legal status until the five littoral states reach a new agreement. Iran’s reliance on these treaties is curious because neither makes any reference to seabed ownership or its use.

What the U.S. Should Do

The Caspian is located between Europe and Asia: two of the most energy-consuming markets in the world today and two regions that are home to some of America’s closest treaty allies. America can take a number of steps to help safeguard its political, economic, and security interests in the region. The United States should:

• Show a more visible presence in the region. A good way to start re-engagement could begin easily and symbolically with a just few high-level visits by U.S. officials. The U.S. should send more Cabinet-level visitors to build relations in the region.
• Support a peaceful and speedy resolution of Caspian Sea ownership. It is in America’s interest and the interest of its European allies to resolve the legal status of the Caspian Sea and demarcate the maritime borders. Finding an agreement to the Caspian dispute will remove a potential source of instability and help to advance economic and energy opportunities in the region. It will also improve Europe’s energy security.
• Offer political support for the construction of the Trans-Caspian Gas Pipeline. As Europe seeks alternatives to Russian and Iranian gas, a Trans-Caspian Gas Pipeline will play an important role.

Staying Engaged

Even though each year brings new rhetoric about how an agreement will soon be reached, nothing has changed in the geopolitical situation to suggest that the recent meeting in Kazakhstan will end the deadlock among the Caspian states. However distant the region might seem for U.S. policymakers, the Caspian Sea has the potential to improve the energy security of America’s closest allies and should not be ignored.

—Luke Coffey is Director of the Douglas and Sarah Allison Center for Foreign Policy, of the Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy, at The Heritage Foundation.